International sale of goods

Introduction

In the international arena, since 89 countries have ratified the United Nations Convention on Contracts for the International Sale of Goods (UNCTAC, CISG, for its acronym in English or Vienna Convention), this is used on a large number of occasions. Consequently, the Convention will apply to “contracts for the sale of goods between parties that have their establishments in different States when those States are contracting States (understanding “Contracting States” as those States that have ratified said treaty); or when the rules of private international law provide for the application of the Law of a Contracting State” (art. 1 CISG). This is a treaty constituted in uniform international law for sales operations.

The application or not of this treaty will depend on the specific case:

• Direct option: incorporation of the CISG into the contract (autonomy of the parties).
• Indirect option: the parties select the legislation of a country that is a Contracting State, and said State has not made a declaration of exclusion of this indirect option through art. 95 of the CISG (for example, USA, China…).
• Express exclusion: the parties expressly exclude their submission to the CISG, either by the decision of the arbitrators, the national legislation chosen or by the rules of private international law.

Thanks to the CISG, exporters can avoid problems in the choice of applicable law, by offering “accepted and solid rules on which parties, courts and arbitrators can rely”. Unless expressly excluded in the terms of a particular contract, the CISG is considered to be incorporated in national law and supersedes any applicable legislation on the sale of merchandise between operators from the different states that adhere to it.

Aspects to note

First of all, the following will be considered sales:

“contracts for the supply of goods to be manufactured or produced, unless the party ordering them assumes the obligation to provide a substantial part of the materials necessary for such production” (art. 3).

Secondly, regarding the scope of application (art. 10):

“a) if one of the parties has more than one establishment, its establishment will be the one that bears the closest relationship to the contract and its performance, taking into account the known circumstances or provided by the parties at any time before the conclusion of the contract or at the time of its conclusion;

b) if one of the parties does not have an establishment, their habitual residencel will be taken into account”.

On the other hand, the basic obligations of each party are:

The seller must deliver the goods, transfer ownership to him and deliver any documents related to them under the conditions established in the contract and in the CISG (art. 30).

The buyer must pay the price of the goods and receive them under the conditions established in the contract and in the CISG (art. 53).

Fourth, regarding breach of contract, this will be essential when:

“causes the other party such prejudice as to substantially deprive it of what it was entitled to expect under the contract, unless the party in breach did not foresee such a result and a reasonable person of the same condition would not have foreseen it in the same situation” (art. 25).

In any case, in the event of the seller’s breach of his obligations, the buyer may (art. 45):

“a) exercise the rights established in articles 46 to 52;
b) demand compensation for damages in accordance with articles 74 to 77”.

And in the contrary case, if the buyer breaches his obligations, the seller may (art. 61):

“a) exercise the rights established in articles 62 to 65;
b) demand compensation for damages in accordance with articles 74 to 77”.

Finally, it should be noted that:

“the parties shall be bound by any usage to which they have agreed and by any practice they have established between themselves” (art. 9).

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Potential conflicts

Who is responsible for defects in the goods?

Articles 31 and 67 of the CISG declare that the seller is responsible for possible delays in transport and for defects in the products. However, when the contract of sale involves the transport of the goods and the seller is not obliged to deliver them to a specific place, the risk will be transferred to the buyer at the time the goods are placed in the possession of the first carrier so that the transfer to the buyer in accordance with the contract of sale.

On the other hand, when the seller is obliged to place the goods in the possession of a carrier in a certain place, the risk will not pass to the buyer until the goods are placed in power of the bearer in that place.

Who would be responsible if there was a problem with the customs authorities and/or the procedures necessary to introduce the equipment across the borders of the different countries?< /h3>

In accordance with article 32.2 of the CISG,

“if the seller is obliged to arrange the transport of the goods, he must make the necessary contracts for the transport to the place fixed by means of transport appropriate to the circumstances and according to the usual conditions for such transport“. Likewise, art. 34 of the CISG clearly states that “ if the seller is obliged to deliver the documents relating to the goods, he must deliver them at the time, place and in the manner required by the contract.”

According to Opinion No. 5 of the CISG Advisory Council:

“If the documents are delivered but do not conform to the contract description, this should be treated as a quality defect [….] The case of missing accompanying documents should be treated as a defect of quantity and not as an equivalent to non-delivery of the merchandise.”

From all this, we can conclude that the seller’s obligation is to deliver the merchandise and that if there is a problem with the documentation, it could be understood as a merchandise defect, and the responsibility would be from the seller.

Why is it relevant when equipment delivery and acceptance occurs?

It is relevant because it determines who is responsible in case of delays and defects in the merchandise. As stated in article 36 of the CISG, the seller will be responsible, in accordance with the contract and the CISG, for:

“any lack of conformity that exists at the moment of transfer of risk to the buyer, even if that lack is only manifest after that moment”. In addition, the seller will also be responsible for “any lack of conformity that occurred after the moment indicated in the preceding paragraph and that is attributable to the breach of any of its obligations”.

In short, the seller is responsible until the moment he delivers the goods, and also after the mentioned time when it is due to a breach of his obligations.

Conformity would take place after reviewing the condition of the merchandise and ensuring that there are no defects. According to article 38, the buyer must examine or have someone examine the goods “in the shortest possible time taking into account the circumstances” (according to Opinion No. 2, the time period for examining latent defects begins when signs of non-conformity become evident). It is important to note that the right to invoke the lack of conformity of the goods will be lost if the buyer does not notify the seller of said non-conformity within a reasonable period of time from discovering them or from when they should have been discovered (art. 39 CISG). According to Opinion No. 2:

“The reasonable period of time to notify the non-conformity after the buyer has discovered it or should have discovered it varies depending on the circumstances. In some cases, notification must be given on the same day [….] No fixed term, be it 14 days, a month or any other, should be considered reasonable in the abstract without taking into account the circumstances of the case. Circumstances that must be taken into account include matters such as the nature of the goods, the nature of the defect, the situation of the parties and the relevant trade usages.”< /em>

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What happens if equipment is defective and users need someone to fix it?

In accordance with the Opinion of the CISG Advisory Council nº 5, section cc) possibility of Repair or Replacement, point 4.5:

“If in a given case the buyer is in a better position than the seller to repair the goods himself or by a third party, he is obliged to do so and cannot declare the contract avoided for fundamental breach”.

Art. 46.3 states that:

“if the goods do not conform to the contract, the buyer may require the seller to remedy the lack of conformity by means of a remedy, unless this is unreasonable in all the circumstances. The request for remedy must be made together with the notification made under article 39 or within a reasonable time thereafter“. In addition, art. 48.1 says that “subject to the provisions of article 49, the seller may, even after the date of delivery, remedy at his own expense any breach of his obligations, if he can do so without undue delay and without causing the buyer inconvenience unjustified or uncertainties as to reimbursement by the seller of the expenses advanced by the buyer“.

Another option would be, in case of cancellation of the contract, apply article 75 and buy a new one.

What happens if equipment needs to be replaced?

We will look at art. 46 of the CISG, which says that in many cases the merchandise must be replaced by the seller, but not always. To interpret it, we must look at the GUIDE TO ARTICLE 46 of the Pace Law School:

“where the buyer requires the seller to remedy the lack of conformity by means of a remedy, that right is limited by considerations of reasonableness, as indicated in that provision and also in the PECL Section 9:102(2)(b) “Reasonableness” is the reasonableness on the part of the seller, as if it were unreasonable for the buyer to demand the remedy of the defects, it would not do so. If the efforts to repair the merchandise involve unreasonable costs in relation to its value, for example, due to travel expenses associated with international trade relations, imposing on the seller the obligation to repair the merchandise would be unreasonable. and contrary to good faith in international trade“.

Can a contract be voided due to equipment defects?

According to article 49.1 of the CISG, the buyer can declare the contract avoided

“a) if the seller’s breach of any of its obligations under the contract or this Convention constitutes a fundamental breach of contract; or

(b) in case of non-delivery, if the seller fails to deliver the goods within the additional period fixed by the buyer in accordance with paragraph (1) of article 47 or declares that he will not deliver them within the period so fixed “.

On the other hand, in accordance with Opinion No. 5 of the CISG Advisory Council:

“There is no fundamental breach when the lack of conformity can be remedied by both the seller and the buyer without this entailing an unjustified inconvenience for the buyer or a delay incompatible with the importance attached to the performance period.

“Where the non-conformity of the goods can be remedied by the seller – for example, by repairing the goods or delivering replacement or missing goods – without causing unreasonable delay or inconvenience to the buyer, there is still no a fundamental breach”.

Due attention must be paid to the purposes for which the buyer needs the goods. If timely delivery of conforming goods is the essence of the contract, repair or replacement often causes unreasonable delay”.

Conclusion

In short, when said Convention is applicable, we must comply with the provisions of its articles for any conflict that may arise. As a supplement, depending on the case, the UNIDROIT Principles on International Commercial Contracts, and the Principles of European Contract Law may be used to fill the gaps in the interpretation of the CISG.

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